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Pathways of local economic development: tales of cities in the United States and South Korea

PATHWAYS OF LOCAL ECONOMIC DEVELOPMENT:
TALES OF CITIES IN THE UNITED STATES AND SOUTH KOREA
by
Hyeyoung Chang
____________________________________________________________________
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(POLITICAL SCIENCE)
December 2010
Copyright 2010 Hyeyoung Chang

Local economic development may be defined as increases in the "local economy's capacity to create wealth for local residents." With current unlimited competitiveness in the international market, cities have become not only a place to produce goods but also a spatial consideration for current and future workers' everyday lives. However, not every city can achieve its desired economic success, and the pathways toward economic prosperity are diverse. How to accomplish the desired level of economic development and what to develop are two different but intertwined issues that should be understood based on political, economic, and social conditions in localities. Variations in local economic development have been explained by the international, national, and local contexts. These political and economic contexts are shaped by the nation state's political structure, the structure of industry in localities, and determining local governance structure. What are the determinants of the type of local economic development in the manufacturing industry cities in different political settings?; This research focuses on the impacts of political and economic contexts of cities and their local economic development pathways, conducting in-depth case studies of industrial cities in the United States and South Korea: the City of Detroit, the City of Pittsburgh, Ulsan Metropolitan City, and the City of Pohang. The research is validated by the process-tracing method with document research and archive research, including various years of government reports, organization's special reports, annual White papers, census data, and each city's statistical data.; Determinants of local economic development in two different political settings can be understood with international market force, characteristics of political institutional structure, and the role of asset specificity in the region. International market change provides a more direct impact on a single dominant industry-oriented city such as Detroit than on cities of fragmented industry structure like Pittsburgh. Korean cases show a mixed picture of interplay among international market forces, national government, and industry structure, which differs from the United States. While the decentralization process in Korea provides positive opportunities to enhance the local capacity to Ulsan Metropolitan City for overcoming the international marketforce, the same process can be a constraint in the city of Pohang due to its single dominant industry structure. The nature of national political institutions influences the variation in local economic development patterns. In general, the federal system (as compared to a unitary system) tends to create more competition among local governments for government resources. With the insight of transaction cost approach, characteristics of asset specificity in a region explain the diverse impact of each asset specificity in the region. Level of asset specificity plays a negative role in the local government's flexible decision making on local economic development. Traditionally, in top-down development approaches and bottom-up development approaches-- but even bottom-up development approaches-- it is hard to ignore the role of the higher level of governments. Some localities more rely on the higher level of government support in order to reorganize and enhance the local economy. Asset specificity is not fixed and constantly transforms based on the mobility of capital and labor.; If asset specificity is high in a region, firms do not want to move from the region unless they are willing to accrue substantial cost, and thus asset specificity becomes a strong bargaining tool when the relationship with local government needs to be negotiated. In the case of the developmental state, asset specificity in certain a locality is heavily embedded over time due to the national economic development plan. For example, Ulsan and Pohang had been designated as "targeted" growth poles for national economic development over three decades with specific manufacturing industries such as automobile, petrochemical, shipbuilding, and steel industry.

PATHWAYS OF LOCAL ECONOMIC DEVELOPMENT:
TALES OF CITIES IN THE UNITED STATES AND SOUTH KOREA
by
Hyeyoung Chang
____________________________________________________________________
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(POLITICAL SCIENCE)
December 2010
Copyright 2010 Hyeyoung Chang